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Thursday, March 13, 2008

Vitalian Economic Theory

In the comment section of a letter to the editor found here, Wade Vitalis offers economic advice to Mr. Schaps. Let’s examine the Vitalian theory of economics just from what he instructed Mr. Schaps.

According to the time-tested Vitalian theory, while it is somehow “. . . un-American, anti-capitalistic and darn near socialist” to expect a private business owner to create jobs during a slow time, it is American, capitalistic and anti-socialist for the government “. . . to create jobs in an unstable ecomomic [sic] time like we are in.”

He theorizes this is because, “. . . Government spending creates jobs and if people have jobs they spend money. That money multiplies in the economy as it is re-spent on consumption.” And “ . . . a dollar of govenment [sic] spending multiplies as it gets spent over again throughout the economy generating income and wealth.”

Voila! The problem is solved. It just takes government.

Question. So if this theory works for government, then why doesn’t it work for the private business owner? Why any hamburger shop should just spend some money to create jobs and those employees will spend money which will be multiplied in the economy many times over!

I guess government money works, but private money doesn’t. It must take legislation to create jobs. This is the Vitalian version of the “Keynsian [sic] economic policy [that] saved us from the great depression” which therefore should save us from this much milder recession.

I would take the economic theory of Adam Smith and Milton Friedman any day over John Maynard Keynes. In the end, a liberal like Vitalis has a different economic theory than conservatives do. He thinks Keynesian government spending in the New Deal delivered our parents and grandparents from the Great Depression.

Jim Powell has a different idea, stating it clearly in the title of his book FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. Click here and scroll down for some significant comments about this book.